In May 2022, NJSC Naftogaz of Ukraine created the company Naftogaz Slovakia s.r.o., according to data from the open registers of the republic,
The authorized capital in the amount of EUR300 thousand is provided by another subsidiary of NJSC – Naftogaz Trading Europe AG (Switzerland). Vladimir Tomash, an Ivano-Frankivsk businessman, is listed as the head of the Slovak enterprise.
The company’s initial activity was the rental of real estate, and since mid-June, administrative services, mediation in the field of trade and production, advertising, marketing and consulting services, as well as market and public opinion research have been added.
Naftogaz of Ukraine unites the largest oil and gas producing enterprises of the country (100% of Ukrgazvydobuvannya and 50% + 1 share of PJSC Ukrnafta). The Group has a monopoly on the storage of natural gas in underground storage facilities (100% Ukrtransgaz) and the transportation of oil by pipeline across the country (100% Ukrtransnafta), and is actively developing the direction of gas supplies to household consumers.
NJSC Naftogaz Ukrainy, through the issuer of its Eurobonds, Kondor Finance plc, has approached the holders of these securities in the amount of almost $1.5 billion with a proposal to defer coupon payments on them for two years, including postponing the repayment of Eurobonds for the same period – 2022 for $335 million.
“In light of the protracted circumstances affecting Ukraine as a result of the ongoing full-scale Russian military intervention and its impact on Ukraine’s energy security, the Issuer, at the request of the Borrower, has initiated this Consent Request in order to obtain the approval of the Noteholders to facilitate the Borrower’s retention of available cash to support strategic priorities. Ukraine,” the stock exchange said.
As reported, there are currently three issues of Naftogaz Eurobonds circulating on the market, all of which were placed in 2019: in July – three-year for $335 million at 7.375% and five-year for EUR600 million at 7.125% (one fifth of the euro bonds were bought by the EBRD ), and in November – 7-year for $500 million with a yield of 7.625%. The maturity date for the $335 million issue is July 18, 2022.
Naftogaz proposes to pay all coupons on 2022 and 2024 Eurobonds on July 19, 2024 and redeem 2022 Eurobonds on the same day. And NAC would like to pay coupons for Eurobonds-2026 on November 8, 2024.
The offer also includes a waiver of any default that occurs as a result of such a deferred payment and compliance with certain covenants for a two-year period (from July 19, 2022 to July 19, 2024 for Eurobonds 2022 and 2024 and until November 8, 2024 for Eurobonds-2026)
Naftogaz, in the argumentation of its request, indicates that the government, by Decree No. 691 of June 17 of this year, obliged the group to ensure the availability of natural gas in storage facilities as of October 1 in an amount sufficient for the stable passage of the autumn-winter period, including to meet the needs household consumers and heat supply organizations.
“Thus, the borrower needs to purchase and import natural gas in the amount of up to 5.6 billion cubic meters of natural gas for a total amount of more than UAH 230 billion (about $7.8 billion). Naftogaz is also obliged to provide natural gas to the most vulnerable consumers ( primarily the population of Ukraine) at fixed prices, which in many cases are many times lower than market prices for natural gas in Ukraine and Europe,” the stock exchange said.
The NAC adds that the Russian invasion of Ukraine has led to a significant economic and business downturn in the country, the inability of many Naftogaz customers to pay for the consumed gas has increased debt on the company’s balance sheet and negatively affected its liquidity, and any continuation of aggression will put additional pressure on NAC balance.
“It is possible that the borrower may not be able to comply with the current provisions of the relevant loan agreements (…) while the invasion continues. Therefore, the borrower considers it necessary and prudent to remove restrictions that may jeopardize its priorities and objectives, in addition to removing the administrative burden on the borrower in these exceptional circumstances,” the company argues for the need to lift covenants.
According to the report, Naftogaz does not plan to pay any premium to holders of its bonds for deferring payments.
In accordance with the document, the deadline for voting on proposals expires in the afternoon on July 21, and the meeting and announcement of the results are scheduled for July 26.
Naftogaz attracted Citigroup Global Markets Limited as an agent for this proposal.
This announcement led to a drop in quotations of NAK Eurobonds maturing in 2024 on the Frankfurt Stock Exchange, according to information on its website, from 29% to 10% of face value, and Eurobonds-2026 – from 24.44% to 20% of face value.
Naftogaz Ukrainy plans to import 15,600 tonnes of petrol and diesel fuel into the country in July, head of the company Yuriy Vitrenko said.
“Naftogaz joined the task of eliminating the shortage that arose in the oil products market at the end of April. For the third month already, we have been increasing the volume of deliveries, on average 2.5 times monthly. In July, we plan to deliver 15,600 tonnes of gasoline and diesel,” he said on Facebook.
According to him, the company is ready to contract dozens of times more, but logistical restrictions prevent the delivery of oil products to the border of Ukraine from major ports in Europe, where there is the resource.
“Despite this, we have a positive trend. And if such rates of increasing imports of fuel continue, then in a few months Naftogaz may become the market leader,” Vitrenko said.
As reported, Ukraine in June 2022 will increase fuel imports by 1.6 times compared to May – up to 600,000 tonnes. In particular, 2/3 of them will be diesel fuel, 1/3 – gasoline and liquefied gas.
The consolidated net profit of NJSC Naftogaz of Ukraine for 2021 amounted to UAH 12.023 billion against a net loss of UAH 19.002 billion in 2020.
According to the reports published on the website of Naftogaz, its sales revenues last year increased by 36.5% (by UAH 58.15 billion) compared to 2020 – up to UAH 217.384 billion, total revenues – by 13.5% ( by UAH 25.962 billion), up to UAH 218.979 billion.
In terms of segments, revenue from sales in 2021/2020: sales of natural gas (UAH 136.751 billion / UAH 75.821 billion), domestic exploration and production (UAH 90.309 billion / UAH 61.472 billion), Ukrnafta (UAH 36.944 billion / UAH 35.535 billion ), gas transit services (UAH 32.72 billion/UAH 46.724 billion), gas storage (UAH 4.764 billion/UAH 6.046 billion), oil transit services (UAH 3.583 billion/UAH 3.466 billion), domestic oil transportation (UAH 0.411 billion UAH/0.275 billion UAH), other (3.165 billion UAH/2.776 billion UAH), elimination (-91.263 billion UAH/-72.881 billion UAH).
Geographical structure of income from the sale of goods and services in 2021 and 2020: Ukraine (UAH 175.709 billion/UAH 104.266 billion), RF (UAH 36.071 billion/UAH 49.91 billion), Europe (UAH 4.457 billion/UAH 4.837 billion), Asia (UAH 0.802 billion/0), Egypt (UAH 0.342 billion/UAH 0.209 billion), USA (UAH 0.003 billion/UAH 0.012 billion).
The press release of the NAC to the published financial statements notes that the main profit of the company last year was received from mining.
“However, not all segments of activity were profitable and this needs to be corrected. In particular, the activity of importing, trading and supplying gas was unprofitable due to state regulation, primarily the decisions of the NEURC regulator. Gas storage activities were also unprofitable, partly also from – for the decisions of the regulator,” said the head of the NAC Yuriy Vitrenko.
“State-owned companies should be profitable under normal conditions. Given the scale of Naftogaz, such profits are not excessive, taking into account the invested capital and its cost. At the same time, the data indicate that Naftogaz would be profitable in 2021 without gas transit. This important achievement,” he said.
Naftogaz unites the largest oil and gas producing enterprises of the country (100% of Ukrgazvydobuvannya and 50% + 1 share of PJSC Ukrnafta). The Group has a monopoly on the storage of natural gas in underground storage facilities (100% Ukrtransgaz) and the transportation of oil by pipeline across the country (100% Ukrtransnafta), and is actively developing the direction of gas supplies to household consumers.
NJSC Naftogaz Ukrainy has appointed Oleksandr Scherba as head of its Swiss subsidiary, Naftogaz Trading Europe S.A., instead of Willem Coppoolse.
The relevant notice was published in the Swiss press in early February.
Scherba, who served as Ambassador Extraordinary and Plenipotentiary of Ukraine to Austria from November 2014 to April 2021, joined Naftogaz in October last year as Chief Adviser to the CEO on international activities’ coordination.
Coppoolse completed his work at Naftogaz back in May 2021, where he was responsible for the trading direction, and since January 2022 he has been appointed director of the Energy Resources of Ukraine (ERU) group of companies.
As reported, Naftogaz resumed imports of natural gas in early February 2022.
Naftogaz Ukrainy unites the largest oil and gas producing enterprises of the country (100% of Ukrgazvydobuvannia and 50% plus 1 share of PJSC Ukrnafta). The Group also has a monopoly on natural gas storage in underground storage facilities (100% of Ukrtransgaz) and oil transportation by pipeline across the country (100% of Ukrtransnafta), and is actively developing gas supplies to household consumers.
NJSC Naftogaz Ukrainy in a letter sent to the government at the beginning of this year warned of the risks of balancing the gas transmission system (GTS) of Ukraine in the current heating season, which, according to the company, are associated with the problems of forming sufficient natural gas resources for these purposes by Gas Transmission System Operator Ukraine (GTSOU).
In a copy of the document available to the Interfax-Ukraine agency, Naftogaz notes that, according to the law on the natural gas market, GTSOU must purchase gas for these purposes “in a non-discriminatory and transparent manner and on market conditions.”
It notes that the current legislation in no way imposes on the participants in the natural gas market, in particular on Naftogaz, the obligation to provide the balancing service to GTSOU.
According to Naftogaz, GTSOU did not provide, as provided for by European rules, the possibility of trading gas for the needs of balancing the system on liquid exchanges or on its own trading platform.
Naftogaz recalled that the contract between GTSOU and the subsidiary of Naftogaz, Naftogaz Trading gas supply company LLC, on the provision of balancing services by the latter expires on January 19, 2022, and a new similar tender in December 2021 failed due to insufficient interest from market participants in the conditions proposed by GTSOU.
Naftogaz informs that it does not see an opportunity to participate in a new tender for the purchase of balancing services by GTSOU for 2022. According to Naftogaz, the GTS operator, by purchasing the balancing service from Naftogaz, actually resells it to gas market entities (primarily Naftogaz) and receives super profits.
